The surprising strategy to surviving the economic recession

Some manufacturing firms that survived the global financial crisis have one unusual secret to their success: stop manufacturing.

17 May 2016

Though just one of the strategies that helped keep some New Zealand manufacturing firms economically buoyant, it was among the most surprising results of Simon Collins’ PhD thesis.

Simon, who graduates on 17 May, dedicated his PhD to investigating the factors that increased resilience in New Zealand manufacturing firms to help them withstand the worst of the global financial crisis nearly ten years ago.

After conducting in-depth interviews with seventeen manufacturing firms, he identified four resilience-building strategies that separated those that continued to perform well during the recession, and those that did not.

“One of the biggest surprises was that some of the resilient firms stopped being manufacturers. They outsourced manufacturing and instead focussed on developing and designing great products, and then taking ownership of distributing and retailing those products themselves. By delivering their products straight to their customers they captured some of the margin that would usually go to a third party,” Simon says.

Simon says this tactic was part of a wider survival strategy to maximise efficiencies, which saw resilient manufacturing firms aiming to be more efficient at every stage of the manufacturing process. This improved margins, and as a result, muted the negative effects of lower sales and the unfavourable exchange rate.

Simon’s research identified three other resilience-building strategies:

Innovating platforms – developing the next generation of products to stimulate new sales

Actively collaborating – working closely and consistently with other firms and individuals to help develop technology and products

Cataloguing specialist knowledge and skills - building libraries, creating databases of skills and lodging patents to identify, protect and then capitalise on areas of expertise.

Professor Sally Davenport, one of Simon’s supervisors, says his research captures the response of firms from “some stellar performers to a couple that subsequently went under, so he had a continuum of performance from which to glean resilience factors.

“Simon’s analysis of their experiences can help other firms build resilience to survive future disruptions,” she says.

Simon is already doing just that through his consultancy company Visory, which helps businesses use information design to facilitate the communication of strategy.

“I started Visory with two friends around the time I began my PhD. My research has been really valuable in our work because the findings are widely applicable to the type of strategy work we do for our clients,” he says.